Budget Woes For Jewellers? Rs 2 lakh Cash Limit May Be Reduced to Rs 50K
India's huge jewellery retail market is under the scanner for non-compliance with PMLA norms
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After India's diamond merchants, gold jewellery retailers in the country are under the lense of the Director General Audit (DGA) of the Central Board of Indirect Taxes & Customs (CBIC). For many years now, diamond merchants and traders in India faced the brunt of a stigma attached to the business since they were perceived to be cutting most large deals in cash. India is the world's second largest importer of bullion metals and buying gold jewellery is a passion for the masses. India has more than 2.5 lakh retail jewellery outlets across the country but there is thin compliance with norms concerning the Prevention of Anti Money Laundering Act (PMLA), which has brought jewellery retailers under the CBIC scanner, sources say.
According to industry experts and sources close to the Finance Ministry, the upcoming budget is also likely to reduce the cash limit for buying bullion metals and jewellery from Rs 2 lakh currently to just around Rs 50,000. In July's first week, the Modi 3.0 government will present its first full budget and duties related to bullion will see some crucial steps, the sources said.
The DGA is responsible for suggesting measures for enhanced tax compliance, gauge the level of audit standards while the CBIC was appointed as a regulator for dealers in precious metals, precious stones and real estate agents. Jewellers were brought under the ambit of PMLA effective May 2023, after which they were supposed to report every suspicious cash transaction to the financial intelligence unit (FIU), which is responsible for keeping a check on such activities and track and other crime-related financing. For this, those jewellers having an annual turnover of more than Rs 500 crores have to appoint a nodal officer and register with the FIU.
Also, those jewellers that have a turnover of less than Rs 500 crores are supposed to register with the city's local jewellery association, which inturn is required to appoint one point nodal officer, who reports to the FIU with regard to the members of his association. But there is negligible compliance with these requirements by the jewellers, who are not reporting enough suspicious cash transactions for which there is a set criteria and limit of cash.
The PMLA laws require jewellers indulging in cash transactions with a single customer repeatedly or through a series of transactions in a month to report the same to FIU or the nodal officer of the association when such transactions exceed Rs 10 lakh. But industry sources are of the view that among the 2.5 lakh jewellers in India, less than 1 per cent may have registered with the FIU or with the association, for the purpose of PMLA.
When India demonetised its high-value currency notes in 2016, the price of gold rose sharply in the day following the announcement by Prime Minister Narendra Modi. This was mainly on the back of the perception that demand for gold shot up as jewellers were facitatilating high-value purchases of bullion metals and jewellery in cash. The perception in the government is that high value cash transactions at jewellery stores are going unreported and hence more curbs and a crackdown are required. Only since the industry is known to generate millions of jobs in India, the government has been treading a cautious path. There is also fear that any crash down with iron hand can lead to massive despondency among jewellery retailers leading to job loss scenarios like India saw in its once flourishing diamond industry.
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